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Tat Hong Q2 net profit up 39% at S$11.5m, boosted by subsidiary sale, forex gain
CRANE rental company Tat Hong Holdings reported a net profit of S$11.5 million for its second quarter ended Sept 30, 2014, up 39 per cent from S$8.2 million a year ago.
However, the numbers included gains from the sale of its subsidiary Hup Hin Transport in July. This partly boosted other income to S$10.1 million, from S$2.9 million last year. Foreign exchange gains of S$4.5 million were also recorded for the quarter, compared to foreign exchange losses of S$6.6 million a year ago. Exclude these two factors and the earnings numbers do not look as pretty, analysts said. Meanwhile, revenue fell 18 per cent to S$152.8 million, from S$185.3 million.
Tat Hong CEO Roland Ng told analysts on Friday evening that he believes the worst is over for the group's key Australian business. "But the recovery won't be that fast," he said.
Mr Ng added that management knows where the problems with the business are and knows it has fat to trim. Selling Hup Hin was part of trimming the "fat", he noted.
Hup Hin was involved in mobile lorry cranes and trailers that took up storage space and land. Tat Hong's crawler cranes, by contrast, could be deployed on site for a few months at a time. "If I didn't sell it, next year they'll require a lot more equipment. The cranes are all very old, need to renew. (So why) strain myself, buy more assets, might as well sell it and get some cash."
Management said that on the bright side, Tat Hong's tower crane rental business in China saw revenue increase 9 per cent to S$24.5 million. Utilisation rates went up to 80 per cent at end-September compared to 76 per cent a year ago, despite a larger fleet size of 933 tower cranes against 862 units a year ago. Overall, gross profit margin was maintained at 36.8 per cent, due to a high margin from its crane rental business.
Tat Hong declared an interim dividend of half a Singapore cent, compared to one cent a year ago. The counter closed unchanged at 79.5 Singapore cents.